It’s 1…2…3 strikes you’re out!

When it comes to classical charting, it is always best when a multiplicity of developments occur. Such is the case in the S&P right now. There are three (if not four) chart developments that could support an important change in trend.

FIrst, the late April breakout from the 9-week cup and handle pattern has not resulted in follow through. The top of this pattern was tested hard on May 5. A move below the May 5 low would be a failure of this pattern. Possible strike 1.

Second, the daily chart displays a trendline from the March low. While I am not a big fan of trendlines, when a trendline violation occurs simultaneously with other developments it grabs my attention. Possible strike 2.

Importantly, a decline below the May 5 low would complete all three developments. There is one other important technical factor worthy of note. The Ben Laden top now appears to be a clear blow-off. The market has been unable to trend back into the range of this reversal day.

I will short this market if the May 5 low is penetrated. The target would be 1243. I remain long the Nasdaq from April 20– and am very close to being stopped out of that trade.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Peter Brandt entered the commodity trading business in 1976 with ContiCommodity Services, a division of Continental Grain Company. From his start in the commodity industry, Peter's goal was to trade proprietary funds. But, he first needed to learn the business. More »

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